Quick Hits
- The DOL’s Employee Benefit Security Administration (EBSA) recently released final rules requiring more financial transparency and disclosures from PBMs to health plans.
- The rule’s purpose is to give large employers and plan fiduciaries more information to evaluate their contracts with PBMs and affiliated brokers and consultants.
- The regulations are applicable to plan years beginning on or after July 1, 2027.
The final regulations will require both initial disclosures ahead of a service agreement being executed and ongoing disclosures every six months or, if requested, quarterly. The regulations also include specifics regarding disclosure of spread compensation by PBMs and fees and other payments that flow to other entities, including rebate aggregators.
PBMs negotiate discounts and rebates for prescription drugs, maintain coverage tiers for drugs in health plans, build pharmacy networks, process claims, and set reimbursement rates for pharmacies. The new regulation requires PBMs to disclose conflicts of interest and clarify their fiduciary role and authority to change a health plan’s drug formulary.
The regulation applies to PBMs expecting to receive more than $1,000 for services provided to self-insured health plans that are governed by the Employee Retirement Income Security Act (ERISA) and have at least one hundred plan participants. It generally will not apply to small or midsized employers that have fully ensured health plans not covered by ERISA.
The final rules implement Executive Order 14273, which directed the DOL to propose regulations to “improve employer health plan fiduciary transparency into the direct and indirect compensation received by pharmacy benefit managers.”
Health plans will be entitled to get an audit from an auditor of their choice and information necessary to meet their legal obligations to ensure that vendor compensation is reasonable. ERISA section 408(b)(2)(A) mandates that service contracts or arrangements must be reasonable, the services must be necessary for the establishment or operation of the plan, and no more than reasonable compensation may be paid for the services. Under the Consolidated Appropriations Act of 2021, PBMs must provide specified disclosures to health plans for the services contract to meet the reasonableness condition.
The disclosures must occur every six months (or quarterly if the plan requests it) and within ninety days of a contract renewal. PBMs will be required to disclose any use of spread pricing, which happens when the PBM charges a health plan a higher price for a drug than what it paid to reimburse the dispensing pharmacy.
Under the Consolidated Appropriations Act of 2026, for plan years beginning on or after August 3, 2028, PBMs must pass through 100 percent of drug manufacturer rebates and discounts to the group health plan. A new amendment, ERISA section 726, will require additional, retrospective disclosures by PBMs regarding drug spending and drug utilization, effective for plan years beginning on or after August 3, 2028.
Key Takeaways
Large employers with self-funded health plans may expect to see more disclosure of pricing and manufacturer rebate information that previously was not disclosed by PBMs.
Ogletree Deakins’ Employee Benefits and Executive Compensation Practice Group will continue to monitor developments and will post updates on the Employee Benefits and Executive Compensation and Healthcare blogs as additional information becomes available.
This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.
Timothy J. Stanton is a shareholder in Ogletree Deakins’ Chicago office.
This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.
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